BEST PRACTICE
Lessons on governance from President Trump
he last year has been a real governance learning experience for us all . For those
Twho watched the outcome of the Brexit
by Joy Allen CDir , Managing Director of Leading Governance Ltd , and Lead Tutor for the Institute of Directors
vote with disbelief , how confident are we in the validity of our democratic system ?
As we watch Donald Trump settle into the White House , and begin to wield the incredible power of that office , many of us are asking ‘ How can he be allowed to do that ?’ Everything we ’ ve ever learned about leadership tells us that the best definition of a leader is someone with followers .
While the Trump voters seemed convinced that he was the right man for the job , many of us have serious questions about his value base . How many ‘ followers ’ does he have among world leaders ?
For most of us , living in a world where someone we don ’ t respect is in charge of the big red button feels unsafe . His ego , arrogance , sexism and general bigotry are breathtaking .
One of the key elements of governance is the separation of powers , and that principle is enshrined in the US constitution . Political authority is divided into three branches : legislative , executive and judicial .
The three are separate and act independently , to stop any one branch from accumulating too much authority and trampling over liberty .
The current controversy is highlighting the importance of having checks and balances to prevent mismanagement . A US federal appeals court has now rejected President Trump ' s attempt to reinstate his ban on citizens from seven mainly Muslim countries . The 9th US Circuit Court of Appeals said it would not block a ruling by a Seattle court that halted the order .
While our own boardrooms may not include a Trump ( you see things could be worse !), similar principles should apply . One of the key reasons for a growing company having a board of directors is that 10 heads ( or 8 or 7 …) are better than one .
Directors have a legal duty to act in the best interests of the company , and they are more likely to do that if they think together , rather than allowing any one director to wield unlimited power .
Other checks and balances should be in place to ensure that key risks are spotted and managed , such as double approvals for all expenditure to prevent fraud , proportionate internal audit to check that controls re working as they should be .
Another key principle of governance is the delegation of authority , usually from shareholders to directors , directors to
18 www . businessfirstonline . co . uk managers ( or committees ), managers to staff . That delegation should happen within a clearly defined framework . The board should have a Schedule of Matters Reserved to the Board – a list of decisions that the board will not delegate , or does not expect to delegate ( including substantial capital expenditure , mergers and acquisitions , board level appointments ).
As we delegate downward through the organisational structure , we also need to ensure that there is accountability at each level to the one above .
Managers need to hold staff accountable for achieving their priorities within the agreed focus of the Business Plan . The Managing Director needs to clearly report to the board , and take full responsibility for what is happening day to day .
Our governance structures and processes should ensure professional decisionmaking . Boardroom skills , experience , knowledge , connections , and perspectives should be tailored to meet the needs of the business .
When carrying out our annual board skills audit , we need to start with the strategic priorities of the company – if we ’ re seeking to break into new markets , or use new technologies in innovate ways , perhaps our skills mix needs to evolve .
The priorities for the board also need to be considered . Do we need to increase our focus on strategic planning , performance oversight or risk management ?
If so , maybe we need to recruit new people with those skills . Boardroom complacency when things appear to be going well can be a real danger to the sustainability of our success .
The growing recognition of the importance
of Risk Management as a board priority must be a positive trend . However , it ’ s vital that the board determines its risk appetite .
We don ’ t want to stop taking risks altogether , or we risk killing the enterprise . The UK Code tells us to give ‘ entrepreneurial leadership within a framework of prudent and effective controls ’ so that we continue to grow and develop the business for the future .
If your board is seeking a new Non Executive Director to support the development of your corporate governance , be careful who you choose . Would you want a Trump on board .
Joy Allen CDir is Managing Director of Leading Governance Ltd , and Lead Tutor for the Institute of Directors , delivering 2 modules of the Chartered Director Programme – ‘ The Role of the Company Director and the Board ’ and ‘ The Director ’ s Role in Leading the Organisation ’. She currently chairs the board of Morrow Communications Ltd and is a trustee for Alzheimer ’ s Society . The views expressed in this article are her personal ones .